06.09.26 Ask An Advisor With Wes Moss

Summary

The Clark Howard Podcast

Episode: 06.09.26 Ask An Advisor With Wes Moss

Air Date: June 9, 2026

Host: Clark Howard (Featuring Wes Moss and Krista Dibias)
Theme: Wealth, Retirement Planning, and Listener Q&A with Financial Advisor Wes Moss

---

Episode Overview

This episode of "Ask An Advisor" features financial advisor Wes Moss and co-host Krista Dibias discussing core pursuits in retirement and analyzing listener financial questions. Wes shares research-backed insights on how meaningful activities drive happiness in retirement, details the psychological and practical value of dividend income, and fields technical questions ranging from 4% withdrawal rules and annuities to Roth conversions and concentrated stock positions.

---

Main Discussion: The Power of Core Pursuits in Retirement

Core Pursuits: More Than Hobbies

• Definition: Wes defines “core pursuits” as “hobbies on steroids” or “super activities” — not just casual pastimes, but engaging, meaningful pursuits that structure retirees’ lives.
• Quote (Wes Moss, 03:41):
  “If you don’t have the core pursuit side of the equation… you can quickly become listless and you end up with this lack of purpose.”

Why They Matter

• Happy retirees have, on average, 5 or more core pursuits; unhappy retirees average 4 or fewer. Some list 12–15!

• Purpose & Happiness: 88% of happy retirees report a strong sense of purpose vs. 32% of unhappy retirees.

  • Quote (Wes Moss, 07:15):
    “The happy retiree group has 88%… that is very telling when it comes to retirement happiness. So the magic number is five or more different core pursuits.”

• Time Spent:

  • Happy retirees spend roughly 20 hours/week on these pursuits; unhappy ones, about 13 hours.
  • That’s 280 extra hours/year — equivalent to seven extra 40-hour work weeks, but devoted to joy and engagement, not work obligations.

• Physical Activity:

  • Happy group: 1 hour/day exercising; unhappy group: 45 min/day.
    (Wes stresses that even small increases can help.)

Popular Core Pursuits (by Category)

• Creative: Painting, woodworking, photography, glass-blowing, gardening, cooking, sewing, cross-stitch, music, arts & crafts, writing.

• Adventure: RV’ing, camping, traveling (“whenever possible”), fishing, boating, motorcycling (“riding my Harley with my buds”), horseback riding, kayaking, scuba diving, rock hunting, flying planes, bird watching, beach outings.

• Health/Fitness: Biking, e-biking, walking, fitness classes.

• Social/Service: Volunteering, animal shelter work, fostering animals, group sports/games.

• Quote (Wes Moss, 12:21):
  “Traveling, reading, walking, music, painting… riding my Harley with my friends showed up a couple different times. So important!”

Personal Core Pursuits (Wes’s Top 3)

• Coaching children’s lacrosse
• Golf
• Pickleball league
• Dad band/music
  (13:34)

---

Listener Q&A Highlights

1. 4% Rule and “Dry Powder” in Portfolios

Adam (Alabama, 13:36): Should I exclude the safe/cash portion of my portfolio when calculating 4% withdrawals?

• Wes: No; the 4% applies to the entire portfolio, including cash and “dry powder.”
• Quote (14:00):
  “Include the whole pie, Adam. Even though you have some dry powder that’s only paying you 3 or 4%, it counts.”

---

2. Equity Indexed Annuities (EIAs) vs. Bonds

Gary (North Carolina, 15:19): Should I use EIAs for the guaranteed part of my income?

• Wes:
  • EIAs are not investments; they are insurance products regulated by state insurance commissions and backed by a company’s claims-paying ability.
  • Not a true substitute for diversified bonds; EIAs are illiquid, pay high commissions, and concentrate risk in a single company.
  • Okay as a slice of the “safety” allocation, but not a substitute for equities/stocks.
• Quote (16:33):
  “They often sound like the magical investment. But the reality… they are not investments. They are insurance products.”

---

3. Pension or Lump Sum? The “6% Rule”

Eric (Ohio, 18:06): Take $38,000/year pension or $417,000 lump sum? Is the “10% rule” still around?

• Wes: Uses a 6% test. Calculate: Annual benefit ÷ Lump sum.
• Eric’s offer yields 9.1%, far exceeding the 6% threshold.
• Recommendation: Take the pension, since guaranteed high income is rare to match investing on your own.
• Note: Teacher pension COLAs are not automatic — increases must be voted on.

---

4. How Much Retirement Income Should Come from Dividends?

(22:22–28:09)

• Wes:
  • Two broad paths: “Appreciate and sell” (rely on asset growth + withdrawals) or live off dividends/interest.
  • Dividend yields are currently low: S&P 500 yields ~1%, so $5,000,000 is needed for $50,000/year in dividends at that rate. Some stocks/sectors yield 3–4%; a $1.5M portfolio at 3.5% yields ~$50k/year.
  • Psychological benefit: Receiving income stream (dividends) cushions retirees when portfolios fluctuate or markets decline, delivering “calm” and consistency.
• Quote (25:16):
  “There is something psychologically very powerful… when dividends themselves, just the income part of that equation, is paying the bills.”

---

5. Roth Conversion Strategy

Zoe (Washington, 28:09): At 64, should I convert my 401(k) to a Roth or hold off for RMDs? Wants estate flexibility for heirs.

• Wes:
  • IRA money (traditional/Roth) is not eligible for step-up in basis; only taxable accounts and real estate get this.
  • Converting now could push Zoe into higher tax brackets; paying conversion taxes requires withdrawing more from tax-deferred accounts, which is less efficient.
  • When SS and pension start (at 70), income likely lower than now, making Roth conversion less attractive currently.
  • Recommendation: Likely better to defer conversion; consult a tax professional for detailed analysis.

---

6. Diversifying Out of Company Stock (RSUs)

Scooter (Georgia, 32:10): RSUs make up 40% of my portfolio. Why diversify and pay capital gains?

• Wes:
  • Concentrated positions can risk your entire retirement security—blue chip stocks can and do decline sharply.
  • Tax efficiency is important, but single-company risk outweighs potential tax savings.
  • Use lot selection to tax-efficiently trim down your concentration; aim to keep no more than 20–30% in any single stock heading into retirement. Plan sales to stay in lower capital gains brackets.
• Quote (33:49):
  “Just remember, blue chip stocks go down too… If you had 40% of the portfolio go down in a big way… that would mess up retirement. That is not a chance I would like you to take.”

---

7. FDIC Insurance Limits with Multiple CDs

Gerald (Michigan, 36:24): Are laddered CDs counted separately toward FDIC insurance or combined?

• Wes:
  • All deposits (savings + CDs) in one name at a single bank are combined for the $250,000 FDIC limit.
  • To insure more, use: additional banks, joint accounts, or add beneficiaries (each adds $250k of coverage).
• Quote (36:52):
  “Just because you have 12 different CDs doesn’t give you new limits on each one. It’s [by] account name or titling.”

---

Notable Quotes & Memorable Moments

• On Retirement Activities:
  “If you think about some of the things that you love to do in your mind, you don’t say, ‘Well, I just do this’… if it is that kind of activity where you can throw a ‘just’ before it, then it doesn’t count.”
  (Wes Moss, 04:14)

• On the Purpose/Activity Link:
  “The happy retiree group is almost three times the level of having a strong sense of purpose.”
  (Wes Moss, 07:15)

• On Dividend Yield Realities:
  “Oh wow, it’s only 1%. So you need $5 million in a portfolio at 1% dividends to get you that $50,000.”
  (Krista Dibias & Wes Moss, 25:15)

• On Stock Concentration:
  “[If] you had 40% of the portfolio go down in a big way… that would mess up retirement. So that is not a chance that I would like you to take.”
  (Wes Moss, 33:49)

---

Timestamps for Key Segments

• 03:41 — Core pursuits: definition and impact on retirement happiness
• 07:15 — The “magic number” of pursuits and sense of purpose data
• 09:23 — Exercise/time commitments: Happy vs. unhappy retirees
• 12:21 — Examples of creative and adventurous pursuits
• 13:34 — Wes’s personal top core pursuits
• 14:00 — 4% withdrawal rule and cash “dry powder”
• 15:19 — Equity Indexed Annuities vs. bonds
• 18:06 — Pension vs. lump sum: the 6% rule
• 22:22 — What % of retirement income should be dividends?
• 28:09 — Roth conversion vs. RMDs for estate planning
• 32:10 — Diversifying away from RSU concentration
• 36:24 — FDIC insurance for CDs and savings

---

Final Notes

• For more listener questions: Visit wesmoss.com/ask
• Podcast and YouTube subscriptions encouraged
• Episode takeaway: Financial happiness in retirement is as much about planning joyful, purposeful activities as it is about building wealth. Diversification and understanding the psychological side of finances are essential for a smooth retirement journey.

Transcript

[Windows 11 Advertiser]

Study and play come together on a Windows 11 PC. And for a limited time, college students

[Wes Moss]

get the best of both worlds.

[Windows 11 Advertiser]

Get the unreal college deal Everything you need to study and play with select Windows 11 PCs. Eligible students get a year of Microsoft 365 Premium and a year of Xbox Game Pass ultimate with a custom color Xbox wireless controller. Learn [e-mail] studentoffer while supplies last ends June 30th terms at aka mscollegepc

[Indeed Sponsored Jobs Advertiser]

when you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job posts the boost it needs to be seen and helps reach people with the right skills, certifications and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsored job credit@ Indeed.com podcast that's Indeed.com podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs Foreign.

[Krista Dibias]

Welcome to Ask an Advisor. I'm Krista Dibias here with Wes Moss.

[Wes Moss]

I'm Wes Moss.

[Krista Dibias]

I'm back. Yeah, I'm back, back, back.

[Wes Moss]

So good to have you back.

[Krista Dibias]

Well, Mallory did an amazing job, so I want to thank her for sure. Everybody loves her, of course.

[Wes Moss]

Good. That's good. She'll be excited to hear that. But yeah, it was, it was cool of her to fill in while you were out. And it's great to have you back.

[Krista Dibias]

Well, thanks. I'm super happy to be back. And I hear that you basically gave birth while I was gone. You've got your book ready, right? It's available, is that right?

[Wes Moss]

That's how I say it.

[Krista Dibias]

Didn't it feel like it? I mean, you worked on it forever.

[Wes Moss]

Yeah, I did work on it for almost at least a year and a half.

[Krista Dibias]

It was funny. Somebody made a comment on one of the videos and he was like, I think it was a guy. I don't remember. The irony of waiting for a book called Retire Sooner to come out because you, you can pre order it right now, but you get some bonus stuff like a workbook and some other stuff. Right. If you pre order on Amazon.

[Wes Moss]

Right. The Retire Sooner Method, which is a green book you can't miss. It is available now on Amazon and if you get it before the September 1 date, there are four different things that you or bonuses that you get. There's a workbook that you would get right away, even though you have to wait a little bit for the book. And there's a video that explains everything with the Charts and color assigned book. So you just take your order code from Amazon and go to retire sooner method and then you plug it in there and that's how you get all those bonuses.

[Krista Dibias]

All right. Was all that already explained on Amazon, so we don't have to worry about it.

[Wes Moss]

That's the funny thing about it. It's not as clear as you would like.

[Krista Dibias]

Okay.

[Wes Moss]

So that's why it's, I think it's helpful just to say all you do is if you get it on Amazon, you take your order number and go to retire Sooner method.

[Krista Dibias]

Okay.

[Wes Moss]

That simple. Even though it's complicated, let's put that,

[Krista Dibias]

we will put that in the episode notes so you can see what to do there.

[Sponsor Announcer]

That's a good.

[Krista Dibias]

So today in this episode, you're going to be talking about one of the things that you, you have researched so much, core pursuits in retirement. How important those are non negotiable secret

[Wes Moss]

ones that I have a list of ones where people in America listed as the number one thing that brings them the most joy and the most happiness in retirement. So I'll talk about some of those.

[Krista Dibias]

And then people call Clark the man from Roth and I might call you the man from wealth charts. But dividends, you love dividends.

[Wes Moss]

Yeah.

[Krista Dibias]

So later you're going to talk about how much of your retirement should be in dividends. Right.

[Wes Moss]

How much of your retirement income should come from dividends.

[Krista Dibias]

Come from dividends. Yeah. Very cool. All right. And of course we're going to get to your questions. If you have a question for Wes, you can go to wesmoss.com ask.

[Wes Moss]

So this topic is very fresh for me in my mind around the lifestyle side of the retirement. We can plan for the money side. We have to plan for the money side, of course. And we want to get into the retirement, the money green zones, which is a whole nother topic. But once we get there and we have that foundation, if you don't have the core pursuit side of the equation and a core pursuit, for me, how I define it, these are hobbies on steroids. They are super activities is another cool way to think of them. These are things that you really love to do. They're not, I just do this, I just golf or I just garden a little bit, or I just play cards, I just walk, I just do yoga. If you think about some of the things that you love to do in your mind, you don't say, well, I just do this. And if it is that kind of activity where you can throw a just before it, then it doesn't count. It doesn't count as a core pursuit because it's kind of a. Yeah, once in a while. Like if you play golf twice a year, that's not a core pursuit. It's not a really big part of your life. But I've seen examples over the years of retirees and folks that whether they retire on a normal retirement type age or sooner and they're early retirees, if they don't end up quickly having a really robust schedule where you have full calendar of things to do, a diverse calendar of things to do, then you can quickly become listless and you end up with this lack of purpose. Because socialization gets harder. That's another topic. When we stop working, that automatically gets a little bit harder. And it automatically gets harder as we age per decade. That's just almost an anthropological fact, particularly in the world we live in today. But core pursuits is kind of the netting that holds all this together because it can help you reschedule your life in a good way. Exactly the way you want to reschedule it. As opposed to being answering emails at 8 o' clock at night or answering questions or emails. I probably sent you emails when you were traveling and knowing Krista, you do actually get back to me. I don't even know where exactly you were when you emailed me back. But we're kind of always on work mode in America, the way we live today. So when we get to retirement, it's a pretty big shock when all that stops. So the idea of having these super activities becomes critically important. From my research and I look at the happy camp versus the unhappy retiree camp and there's a statistically significant difference between the number of different core pursuits that each of the groups have. The unhappy group doesn't have enough. They have four on average or less. The happy group of retirees has five or more. And in some of the cases, people have a dozen or 12, 13, 15 different core pursuits they list out, which is pretty remarkable.

[Krista Dibias]

That's a lot. That sounds like you're never not busy with the core.

[Wes Moss]

You just constantly do. And you. And I think part of it too. One of the things, there's a core pursuit almost vortex that happens. That's a really positive cycle. As you start doing more in different activities. A lot of them end up being socially based. You end up doing even more activities because you get lots of other ideas. Hey, if you're a tennis player, you're probably going to get dragged into pickleball.

[Krista Dibias]

Yeah.

[Wes Moss]

And if you're playing pickleball you may get dragged into something else like a mahjong group.

[Krista Dibias]

That's the thing everyone's doing now.

[Wes Moss]

I know it is. It has gotten popular. So core pursuits are non negotiable because they help us when we get into retirement, not just create this schedule and structure that we all need as humans. At least to some extent it helps us create our new sense of purpose. One of my favorite charts title is percentage of Americans who report having a strong sense of purpose. One group, 88% of them have a strong sense. Another group has 32%. Well you can probably guess which group's which. The happy retiree group has 88, 88% of them have a strong sense of purpose. So the unhappy retirees at 32% the happy retiree group is almost three times the the level of having a sense of purpose. And that is very, very telling when it comes to retirement happiness. So the magic number is five or more different core pursuits. The other thing I found had to do with the amount of time, the amount of time commitment or it's not necessarily a commitment because these are things we love to do. The average for the happy retiree group is 18.6. We'll do round numbers here. Almost 20 hours a week on average doing the things they love. The unhappy group is about 13. If you do the difference per week, it's 280 extra hours a year. Which if you equate that to a work week which is a 40 hour week, it's seven extra work weeks. Wow. But you're not working, you're doing your core pursuits. So to me it is not just about the number and the diversity of the core pursuits you're doing. It's about the amount of time you're able to commit to them. Another thought, when it comes to some of this research, working out exercise, physical activity, movement, super important and popular even in both groups. But statistically the happy retiree group, and I'm going to go round numbers again here is in movement type activities, exercise for about an hour a day on average. The unhappy group is about 45 minutes a day again on average. So that's a 15 minute difference. It's not dramatic, it's a 15.

[Krista Dibias]

It really isn't a big difference.

[Wes Moss]

It's a 15 minute per day difference. So adding 15 minutes to your physical activity helpful gets you closer to the happy retiree group. So to me these are some of the things that we can really be thinking about and we don't need to wait until we stop working. We should be doing them today, so we're cultivating them. Here are some of the creative Shows up a lot. Krista I was surprised it's how popular creative core pursuits were. Some of the ones that I write about painting, woodworking, photography, blowing glass. I get a lot of great ideas from this research. Restoring old trains. Not one that I would have ever come up with. Writing a memoir Gardening Gardening is hugely popular for cooking, sewing, cross stitch, crocheting, songwriting, digital video editing, playing music, filmmaking, macrame, arts and crafts. So huge creative category. And then adventure. There's something about adventure core pursuits too. There's also a very interesting statistical relationship between the two groups. The happy retiree group averages almost two what I would call adventure related core pursuits. The unhappy group is less than 1 so it's almost double the between the two groups. And adventure is anything I would well, let's see if you agree. Are these adventure corporates rving? Yes. Camping, Traveling. Traveling. I love this. This was a direct quote for some of the research. Whenever possible. That sounds like you. Sounds like Claude. Fishing. I put that in Adventure boating, motorcycling. There was a leather clad grandpa that replied Riding my Harley with my buds. Horseback riding, kayaking, scuba diving, coral reefs. Wow. Rock hunting and tumbling. Rock hunting, flying planes. That's almost a little too dangerous for me. Bird watching, bass fishing, go to the beach, horse racing. Again, adventure related core pursuits. It gives us something even more to look forward to and that anticipation is so powerful and so helpful mentally for us when it comes to filling our days. There's a whole nother list of health and fitness is super popular as you can imagine. A lot of these things you might somebody said biking regular and e bike. I try to stay off the E part of the bike so that you're actually getting exercise. There's huge category for social and service volunteer. A lot of animal caretaking in our research, foster animals, animal shelter, helping in animal shelters, et cetera. So the top 20 include traveling, reading, walking, music, painting, crafts, cooking, writing, riding my Harley with my friends showed up a couple different times so it's so important to me. It's such a fun part of thinking about when we're no longer answering emails from overseas, we get to really lean into the things we love to do.

[Krista Dibias]

What are your top three core pursuits

[Wes Moss]

right now you think, oh me personally, by the way, this is a cool exercise for anybody to do and I've never It's a little cheesy to say what are your core pursuits? Right. I think even though I came up with the term I Like super activities a little bit better. But every time I've ever asked even a grumpy person, I've asked this too. And people love to give you their core pursuits because you challenge them and say, look, you need five. People are like, oh, wait a minute, five. What are my five? And they'll sit down and think, well, I like this. So it's a very cool question to ask your friends. Even if they're grumpy, they'll sit down and give them to you. For me, I would say that coaching has been one, but that's kind of. That's every year. So I could call that a core pursuit. I do that with. I've done that with all my different kids at their different ages. So coaching lacrosse is big. I would say golf has got to be in the top three for me. I love playing golf. I would put pickle easily in there because I was just in a pickle league, pickleball league. So those are three that come right off the top. And then playing music. I play music and I have a. Call it a. A dad band, if you will.

[Krista Dibias]

Nice.

[Wes Moss]

So that's a really fun one, too.

[Krista Dibias]

I love it. Okay, let's go to some questions. Adam, Alabama says I'm about two years away from retirement, and I have my assets in a 403B divided between a target date fund, REIT annuity, and money market. When I think about starting with my 4% distributions, should that percentage be calculated from the entire portfolio or should the dry powder portion be excluded from that calculation?

[Wes Moss]

Adam's asking, this is a kind of a technical question, but it's probably something that people think about a lot. If you've got the whole Adam from Alabama portfolio, let's say 30% of it is in dry powder, safety bonds, et cetera, money market, and then the other 70% in a diversified way of looking at stocks, maybe commodities. The question is, do you count the dry powder? The answer is yes, you count the dry powder as the whole pie. You even, in my opinion, count the cash. Because first of all, cash, unless we're in a very rare situation, doesn't seem super rare because we did have a long period of zero interest rates. But usually over the course of history, cash earns us something, CDs earn us something. And they are there as a buffer for the more volatile, likely faster growing piece of our overall economic or investment pie. And I think when it comes to planning, making it simple is a really important element to making these successful, making these rules work. So, yeah, you could say technically, I'VE got this much cash, I'm going to exclude it, not counting the 4% rule, because it's not paying much. Include the whole pie, Adam. The whole. Even though you have some dry powder that's only paying you 3 or 4%, it counts.

[Krista Dibias]

Okay, Gary in North Carolina sent in this one. What are your thoughts on EIA's Equity Indexed Annuities? My advisor is recommending them for the guaranteed part of my income versus bonds. He mentions the cons with them as well. Thanks for all your help.

[Wes Moss]

He mentions the cons.

[Krista Dibias]

Mm.

[Wes Moss]

Okay, so this is good. So, Gary, I think the fact that you get. You're trying to get both sides of the equation here, and your advisor is telling you that that is some transparency. So I think that's a good thing. A lot of times these equity index annuities or fixed index annuities are sold like they're the perfect product that's ever been creative. All the upside of the stock market, none of the downside it sets. It just gets a portion of the S and P. But no, they often sound like the magical investment. But the reality, this is the point. They're not investments. They are not investments, a fixed index annuity or an equity index annuity. They are insurance products. You can invest your money in them. But these are not investment products. They're not regulated by the sec. They are regulated by the insurance commission in the state that you buy them. And they are dependent on the claims paying ability of the insurance company. So it's like buying. It's almost like investing in a bond. The. A bond or a bond from a company. And would you do that? If a third of your portfolio, let's say the safety part, that's the bond part. Would you ever put that in one bond from one company? So think of it that way. I'm very comfortable owning bonds, but I want to own an ultra diversified portfolio of bonds. I wouldn't want to just buy one company. So I think that's the way to think about it, and I think I would agree with your advisor, is that it is relative to what you are owning instead of this. Meaning that in my opinion, these are not a replacement for equities or stocks. Even though they say they're linked to the s and P500, that actually is somewhat irrelevant the way they do these calculations. So as a substitute for the safety piece, then that is in the right direction. Just know that you're betting on the credit of one company. They do pay commissions. Now maybe there's some out there that I Have not heard of, but usually these are 4 to 8% commissions that get paid. So you put $100,000 in, somebody's getting paid 5 to 8 grand like that, and then you get locked up, meaning that they're illiquid for a longer period of time. So again, that might work for you for that sliver or that portion, Gary, but I just want you to know all of the of the cons and the pros so that you can weigh them. Not. Not for me.

[Krista Dibias]

Eric in Ohio says I'm a teacher with two or three years left of teaching. Is the 10% rule still in place regarding taking pension versus lump sum? Should I take it all and invest it myself? My current numbers are $38,000 per year versus a lump sum of 417,000.

[Wes Moss]

Okay, Eric, you are a teacher in the state of Ohio and you're asking about the 10% rule. This is a question about do I take a monthly amount for the rest of my life that's pretty much guaranteed, no real guarantees in the world we live in, versus a big chunk that I could likely roll into my retirement account? That's how I'd look at this. So we do the math. And my rule for that, my rule of thumb is the 6% tax.

[Krista Dibias]

Right? That's what I thought it was. 6%.

[Wes Moss]

Mine is 6%. I love that Eric's talking 10, right? Maybe I missed something.

[Krista Dibias]

Yeah.

[Wes Moss]

So let's do the math. You take your annual amount, which in your case would be 38,000, divided by what you could take, which would be 417,000, and what do you get? 9.1%. That beats my 6% test by mile, which would lean towards taking that monthly amount because it's pretty hard to quote. Ensure the amount you're investing is getting that high of a rate of return with seemingly no risk or not a lot of risk. Again, these pension programs still have to make money over time in order to continue to pay people. But you're way above my line of 6%. Usually it's really not till 8, 7 or 8% until I would start really considering the monthly amount. But you're way up here at 9. I'd lean heavily towards that. The only catch. Just remember, Eric, unlike Social Security, that essentially is going to give us a COLA adjustment every time we have inflation for whatever inflation is. These state teacher pension amounts only go up when they vote that they can go up by a certain amount. So they are not tied to COLA. There's not automatic increases. So just remember that 38,000 a year that you would be getting may not go up much, may go up some, but they have to vote on doing so.

[Krista Dibias]

All right, well, we're going to take a quick break. When we come back, what percentage of your retirement income should come from dividends?

[Sponsor Announcer]

Investing with Schwab is like spending a Saturday at a great farmer's market. You can fill your reusable tote with a bit of everything. Maybe you go for some free range self directed investing or perhaps you pick a few farm fresh trades while you peruse. You can even get help from a dedicated advisor. That's full service wealth management. Mix, match and change your mind whenever you want. Because at Schwab, you can invest your way no matter your goals or appetite. For investing, Schwab has everything you need all in one place. Visit schwab.com to learn more. This episode is brought to you by AT&T business. For business owners, connectivity is key. If you are starting your business today, that would be your first concern and your first decision. Reliable connectivity is essential to launching with whether you're local or national. For a business owner, it's a decision that pays benefits every day and in every aspect of your operation. Make the right decision. Choose ATT business. AT&T business is a reliable provider for business owners. Powered by AT&T Business. Built to work. Get AT and t [e-mail] send help

[Wes Moss]

is now streaming on Hulu and Hulu on Disney.

[Krista Dibias]

We're somewhere in the Gulf of Highland.

[Wes Moss]

Getting us out of here should be your focus.

[Sponsor Announcer]

I'm your boss.

[Wes Moss]

You work for me.

[Krista Dibias]

I'm not in the office anymore.

[Wes Moss]

It's bold, relentless and endlessly rewatchable. Discover why critics give it 93% on rotten tomatoes. You're so fired.

[Krista Dibias]

Oh, am I? No. Help is coming.

[Wes Moss]

Send help. Rated R now streaming on Hulu and Hulu on Disney plus. Welcome back to Ask an Advisor. I'm Wes Moss, along with the great Krista Dibias. It's great to have you back here in studio.

[Krista Dibias]

I'm so grateful for my job, for sure. And I'm very grateful to be back.

[Wes Moss]

I think we all are. Unless you're a happy retiree and you're so glad you're done working. All right, we're going to go into. Speaking of retirement, I want to answer this question. How much of your retirement paycheck should come from dividends? Dividends sound great. Everyone says they're good. But are they? Well, it depends on how you look at it. A two part way to think about this one. It's about your investment style, which can be determined by what phase you're in. So if you're an accumulator in your 30s and 40s, you may not care that much about dividends. You're just looking total return and appreciation. The second part of it would be a psychological impact of dividends. And the first caveat is that we're all after the same thing. Regardless of your phase in life, where accumulation, distribution, pre retirement, post, we're looking for total return. Total return equals growth plus income. That's it. You can either have your assets go up in value or they can pay you some rent, dividends, interest, and then you put those two together and that's your total return. How you get there can be different for anyone. It depends on those two stages, investment style, and really, psychologically, what makes you comfortable as an investor. First, as any real problem that should get solved in the right way is you need to understand how much you need. What is your gap? Let's say you get Social Security, and then how much more do you need beyond Social Security? To keep it simple, let's say that number is $50,000. Well, you can do this two different ways. And there's variations of all these ways, but let's call it two distinctly different ways. One is the appreciation and sell. If you only need $50,000 and you have a million dollar portfolio and the stock market goes up 10%, you've gone up $100,000. So you just sell part of that and you've got your 50,000 and your portfolio is still growing and you've got your spending money. I don't know if you call that income, but it's spending money, it's a withdrawal, and you're withdrawing from your appreciation. And that can work. And there are plenty of people that do it that way. What's interesting is that if you're investing in, let's say, just the S and P only as your only investment, the dividend yield on that is actually pretty low on a percentage basis. There have been years where it's been 3, 4, 5%. So a million dollars at 5% would give you 50,000 in dividends. We're not there today. The market value has gone up so much, the income hasn't quite kept up. So even though the market has gone up, the percentage of dividend yield is close to 1%. Oh wow, it's only 1%. So 5 million. You need $5 million in a portfolio at 1% dividends to get you that $50,000.

[Krista Dibias]

Wow.

[Wes Moss]

So the yield really matters. Here's another way to look at it. If you're getting 3.5%, you don't need 5 million. You would need 1.5 million, and that would get you there. It doesn't sound like a big difference. 1%, 3.5%. It matters every quarter. Every tenth of a percent matters. When it comes to dividends, another way to do this would be to have a portfolio that is paying you 3%, 3.5%, 4%. Now, that's getting a little harder to find. But there are plenty of companies and sectors in the s and P500 that are much more dividend heavy and do pay in those higher ranges. They're not. Historically, everything is depressed because the market's gone up a lot and dividend rates are lower today than they've been in a little while. But you can still find 3% dividends, 4% dividends. It's just. It's a little harder to find. So either can work. You can do the appreciate and sell or have a portfolio that gives you an overall yield of, let's say, 3 or 4%. The reason I lean towards dividends, and I would say this is much more for. I think it's for. Again, this goes back to your investment style. It can be for any age, because if you don't need the cash flow, you just reinvest and reinvest and reinvest. And that works for accumulators, but I think it works really, really well for people who are in the distribution phase, saying, I need money every single month or every single year in order to supplement my other income sources. And there is something psychologically very powerful in a good way, when dividends themselves, just the income part of that equation is paying the bills. And to me, dividends to some extent equal calm the stock market. And being an investor takes a lot of internal intestinal fortitude when things get hairy and headlines get crazy and markets go down, retirees that I know that are very, very calm and very happy and comfortable, never. They're not worried about running out of money, which is a major fear in the United States. Sure, almost. At any income level or any.

[Krista Dibias]

Yeah.

[Wes Moss]

Investment savings level, that fear doesn't really go away. But if you're not relying on that appreciation and sell strategy, and you have a year where markets are down or flat, or a couple years where markets are down or flat, but the dividend income itself is filling that gap. That's a place where you can really have a sense of calm. And I think that's why I don't Know if there's a perfect answer to how much of your retirement paycheck should come from dividends. But if the whole thing can come from dividends or other forms of income, I've seen that put people mentally and psychologically, emotionally in a pretty darn good place.

[Krista Dibias]

Okay, let's go to some questions. Again, if you have a question for Wes, you can go to wesmoss.com Ask Zoe in Washington filled out our form and she said, hi, Wes, I'm planning to retire soon at age 64. My question is whether I should convert my 401k to Roth each year or just invest my RMD when the time comes. I have no assets other than my house worth 1.2 million and paid off. I have 200,000 in a Roth IRA and 1.5 million in my 401k. I will draw about 200,000 from my 401k until age 70, but I want my kids to inherit the remainder. After age 70, I expect to have $120,000 in annual income from Social Security and a pension. If I don't do anything, RMD is going to be very painful. But in order to convert my 401k to Roth, I would have to use some of the money I withdrew to pay taxes. I'll keep it under 24%, the 24% tax bracket and convert $90,000, withdraw an additional 30k to pay the taxes. That may not help as much with RMD because I might just be converting the gain. On the other hand, my kids will have more flexibility with regular investment accounts with stock step up in basis upon my death. What would you do?

[Wes Moss]

Hey, Zoe in Washington. There's a lot to that right out of the gate, so I'll clear this part up. You just listed out your accounts. You've got Your, you've got 401k and you got. And you have Roth. It doesn't sound like there's much taxable money here. Kids don't get a step up in basis on that. There's no step up in basis for IRA money or Roth money. Anything that's outside of that. Yes. The house step up in basis, that's not in a retirement account. A taxable brokerage account. Any stocks in there, they would get a step up in basis, but in this case it's not the retirement account. So let's just clear that up right out of the gate. Secondly, the numbers you're telling me 64 to 70, you're going to be withdrawing $200,000 spending money to live on. Well, that means your income is at least 200 grand. And if you're converting 90, that whole conversion amount is also income. So now you're at 290. And if you're single, and I don't know the brackets perfectly in my head, but 24% bracket only goes up to a little over 200k. So you're already maybe right there or already pretty close to filling that 24 bucket. And then from 202 to 256, that's the 32 bracket. And then you're in the 35 bracket at 256 or more. Again, these are single, not married, filing jointly. So I look at it as, and the numbers are obviously higher than that if you're married filing jointly. But if you're already almost at those levels, then your Roth conversion is going to be more like 24, 32, maybe even 35% to convert. These are just round numbers here at 120, when you hit 70, you said you'd had $120,000 in income. And your RMD, let's say is 60, 70,000, your income's only 180, so your income is even lower in the future. It seems like with the RMDs and the other big thing, Zoe, it seems like almost all the money you have right now, the liquid money, it's already in retirement accounts. So in order to pay the taxes, you got to take even more out of the retirement account and I wouldn't want to do that. Usually if you're going to do a Roth conversion, you want it to come out of other after tax accounts. So yeah, I mean again, you could always look at the Roth decision tree chart that we talked about last week. But I would go to your CPA or your advisor and really do the math on this. There's some pretty in depth planning, but to me it doesn't seem like taxes today versus taxes tomorrow would be leaning towards a Roth conversion.

[Krista Dibias]

Scooter in Georgia says, hey Wes Scooter. I know I'm very fortunate to work for a large organization that provides me RSUs as part of my compensation. It is an Aristocrat stock and while it does have its ups and downs, it's fairly stable as today's value makes up about 40% of my total investments and the amount of RSUs I receive increases with each new promotion. I hear everyone say I should diversify, but I'm struggling to understand how selling now and paying long term capital gains, reinvesting in a brokerage account and then paying taxes again would be the best financial move. I'm 46, I make around $200,000. I have 1 million saved in total with 600k in a Roth traditional 401ks and I plan to retire at 55. Thanks for all you and Clark Du. I wouldn't be in the position I'm in today without your advice.

[Wes Moss]

Hey Scooter, a lot of numbers you threw out there. You're in your mid-40s, you're going to retire in about 10 years. Mid-50s, 40% of $1 million saved already. So you've probably got about 400 grand in what sounds like a blue chip stock. Just remember, blue chip stocks go down too. It's rare, er, if you're looking at a decline outside of a general market decline. But it happens, happens all the time. There's a lot of examples I can think of that are really big declines. So let's say you had a billion dollars Scooter and you had half of all your stock in one company. Which by the way, it's not uncommon for a billionaire to do that. Wow, that's a lot of times how people become billionaires, right?

[Krista Dibias]

That's true.

[Wes Moss]

They're usually founders of companies that go think of the Elon Musk, the founders of Microsoft. So if you've got a stock and that's half of your billion dollars and it goes down by 50%, big whoop. Well, you're still fine. You've no, there's no material impact on your, on your life. For Scooter, it would be if you had 40% of the portfolio go down in a big way or maybe even more than a big stock market decline. 50, 60%. That would mess up retirement. So that is not a chance that I would like you to take. Now you've got two things. We don't want to pay taxes unnecessarily. So I totally get that. But I also don't want you to have your retirement get messed up because something happened. Your company fell out of favor in the world and we live in a world that, where economically things change and it's a lot of the economy we live in is a little more bifurcated winners, losers, winners and losers kind of winner take all economy a little bit. That's more within tech. But I think I'm trying to make the point that just I don't want you to take the risk. So we're balancing that with taxes. You're already making 200 grand a year. The capital gain rates are favorable all the way up to if you're married all the way up to like 600 some thousand dollars a year in income. So you have plenty of room in the 15% long term capital gain bracket. What you have less room in is the net investment income tax. That NII tax is 3 point almost 4%. So that kicks in at 250. So I think what I'd be looking to do is I'd meet with your cpa, do the math and maybe you have room up to about 250. You're already 200 in income in long term capital gains before that net investment income tax kicks in. So here's the other thing Krista. Very often you get these RSUs. You've already paid income on them and then they're growing. If you've got a big chunk of those RSUs, remember it's not all, all, all gain. There's some real basis there. So you may be able to sell a fair amount that gets you diversification, that maybe you're finding lots that are higher or more recently attained.

[Krista Dibias]

Very good point.

[Wes Moss]

And then you can reduce your concentration down to 30% or maybe 20%. I would really try to figure out how to do that from a tax perspective. You don't want 40, 50% of your assets in one company headed into early retirement.

[Krista Dibias]

All right. Gerald in Michigan says Wes. I have an account at Ally bank where I have a savings account and I have 12 laddered CDs. The total on deposit at Ally is approaching the fdic maximum of $250,000. My question is, are the CDs considered a separate account for FDIC insurance purposes or should I consider opening another account at a different institution? My savings portion is well under the FDIC limit, but combined with the CDs

[Wes Moss]

I'm approaching Gerald in Michigan in the great state, the Wolverine State, one of your favorites. They're all one. Just because you have 12 different CDs doesn't give you new limits on each one. It's the per account name or titling. So 250 is the limit. And if they add up to 240 that means you only have 10 grand worth of FDIC limit. Now you also have another 250. If you were to have retirement funds at the bank, not a lot of people do that. That's possible. But if it's just you in your name and you don't have any beneficiaries, you could, you could add up to five beneficiaries that apply or applicable to the fdic. So you could have a transfer on a TOD account with a beneficiary and another beneficiary and each one will give you another 250. But if it's just you, Gerald, and you're at the 250, it's not as though you can have a joint you have a joint account with a spouse, TOD account with a beneficiary, et cetera. So it limits your if you're married and you've got kids and beneficiaries you can really utilize. There's a lot of 250ks when it comes to FDIC and you can get a ton of coverage at one bank. If it's you and you've got just this in your name alone, then yeah, you would be looking to diversify amounts above that into another bank.

[Krista Dibias]

Okay, well, that does it for us today on Ask an Advisor. We will be back next week with a brand new episode. Thank you so much. We hope that you will share this episode with a friend if you learned something. And also that you're subscribed to the podcast wherever you Listen or on YouTube that you're subscribed to our channel, YouTube.comClark have a great day.